Tuesday 3rd February 2015
Tax revenues for Irish economy €460m ahead of last year
Income tax continues to rise while VAT receipts increased.
The public finances were in surplus at the end January to the tune of €781 million, compared to a €1.14 billion deficit in the same period in 2014. Taking Sepa’s introduction into account, the year-on-year improvement in the exchequer balance to end January was €680 million.
The public finances are off to a flying start in 2015 with tax revenues in January advancing some €460 million ahead the same period last year.
Exchequer figures released on Tuesday afternoon show the Exchequer is taking the benefit of the recovery in the labour market and in consumer spending.
The Department of Finance said the State collected almost €4.2 billion in tax last month, with VAT receipts increasing strongly and income tax on the rise as well. Corporation tax returns rose, as did returns from the local property tax and excise and stamp duties.
Net voted current expenditure stood at €3.74 billion, down €254 million year-on-year largely as a result of reduced social protection payments.
Although revenues at the start of last year were distorted by the introduction of the single European payments system (Sepa), the department said the year-on-year revenue increase was “in the order of €460 million” when taking the payment system into account.
The public finances were in surplus at the end of January to the tune of €781 million, compared to a €1.14 billion deficit in the same period in 2014. Taking Sepa’s introduction into account, the year-on-year improvement in the exchequer balance to end January was €680 million.
The department said figures for increased returns in individual tax bracket were readjusted “where relevant” to remove the Sepa distortion.
VAT returns reached €1.97 billion in January, as receipts came in from trading in November and December.
“This represents an increase of €225 million or 12.9 per cent, when compared to the corresponding month last year. The strong performance is in line with the positive retail data and consumer confidence from December,” the department said.
Labour market The State collected €1.5 billion in income in January, an increase of €58 million or 4 per cent on the same month in 2014. “This performance is consistent with the recovering labour market with solid employment growth as evidenced by the quarterly national household survey,” the department said.
Corporation tax receipts reached €49 million, representing a €35 million increase compared to the same period in 2014.
The department attributed a €62 million rise to €94 million in local property tax returns to a shift in payment patterns.
Excise duty returns reached €388 million in January, up by some €48 million year-on-year.
The State collected €72 million in stamp duty, up €19 million on January 2014 .
Non-tax revenues reached €266 million, up €47 million year-on-year, following the receipt in January of a special dividend from the ESB in connection with the State assets disposal programme.
Net voted capital expenditure rose €48 million to €181 million, driven by increased capital expenditure in the Departments of Defence, Children and Arts.
Total exchequer debt servicing costs in January stood at €285 million. This represents a year-on-year decrease of €83 million, when a transfer from the current accont to the capital account ius exluded. The decrease was primarily due to lower bond interest after the maturity last month of a 4 per cent treasury bond.
The requirement to make an annual sinking fund payment was removed in the Finance Act 2014.
Joan Burton warns on importance of pension reform
Just 50% of workers currently have pension coverage other than the State pension
The Tánaiste Joan Burton announcing the composition of the new Pensions Council at Government Buildings today.
Reform of the Irish pension system is essential if we do not want to endanger the retirement income of current and future pensions, Tánaiste and Minister for Social Protection Joan Burton has said.
Ms Burton was speaking at a briefing to announce the composition of the new Pensions Council, which will advise the Minister on policy and work to ensure the pensions system has a stronger consumer focus.
And the Minister for Social Protection said she had also approved measures to improve “engagement” between deferred members of defined benefit – or final salary – schemes and those already in receipt of pensions in the event of fundamental changes in the operation of such schemes.
She also announced the establishment of a new Universal Retirement Savings Group to “develop a roadmap and timeline” for the introduction of a new universal supplementary retirement savings scheme – effectively amandatory workplace pension.
Just 50 per cent of workers currently have pension coverage other than the State pension, a figure that is substantially lower in the private sector.
“We must take action to increase pensions coverage to ensure all our pensioners can enjoy their retirement with financial security,” the Minister said.
“If the system is not reformed, its long-term sustainability will be compromised, endangering the retirement income of current and future pensioners.”
Ms Burton gave no indication on when any mandatory system would be introduced but noted that the need for such a system was clear with Ireland one of only two OECD member states not to have a mandatory or quasi-mandatory employment-related pension scheme in place.
She said the new group would bring recommendations to Government outlining cost estimates, the key features of such a scheme and “potential phase-in timeframes”.
The Pensions Council members appointed by the minister yesterday are: actuaries Roma Burke and Anthony Gilhawley; barrister Kirstie Flynn; academic Dr Shane Whelan; journalist Brendan Keenan; Irish Life business development director Sandra Rockett; and Sinéad Ryan.
All have long experience in the pensions sector. The group will be led by former director of the European Consumers Organisation Jim Murray.
Pensions regulator Brendan Kennedy will also sit on the council as will government nominees Helen McDonald (social protection), Marie Louise Delahunty(Finance/Central Bank) and Peter Brazel (public expenditure and reform).
Apart from regulations to formalise the rights of retired scheme members and those who have left companies but not yet retired, which the Minister said would be published next week, she called on the Pensions Authority, the regulator, to continue to bring forward proposals to improve the standard of both defined contribution and defined benefit pension schemes.
Irish Central Bank raises economic growth forecast to 3.7% for this year 2015
Government should maintain ‘prudent’ fiscal stance, it says
The Central Bank said it is now projecting that economic output will expand 3.7% on a gross domestic product basis in 2015.
The Central Bank upgraded its growth forecast for Ireland’s economy, but said the Government should maintain a “prudent” fiscal stance in the lead-in to the general election. the bank is projecting a growth rate of 3.7% for 2015.
In spite of the “very significant improvement” in the public finances, chief economist Gabriel Fagan said Ireland’s very elevated debt levels represent a fragility in the recovery.
On the prospect of public pay talks this year before the election due by April 2016, he said the the public finances themselves have improved a lot but were not yet in a position of safety. He said said it would be “quite unfortunate” if competitiveness gains made since the crash were lost .
Asked about Siptu’s push for a 5% pay rise across the economy, the final outcome off any pay process was more important than the initial claim made.
“But I’d restate that we’d want to be very careful that we do not lose the competitiveness gained over the last few years,” Mr Fagan told reporters at Dame Street
“It’s essential to build on and consolidate the achievement that have been made so far in a number of areas,” he said.
“It’s essential to build up the resilience of the economy so it’s in a position to deal with shocks should they emerge.”
Although the headline deficit this year is forecast to drop below the EU threshold of 3 per cent of gross domestic product, Mr Fagan said the Government will be obliged under European rules to take further steps to eliminate the structural deficit. The structural deficit is an estimate of what actual deficit would be if the economy was operating at full capacity.
“There is a need for further fiscal consolidation in the years ahead ahead. In terms of the particular rules it will be a fiscal consolidation in structural terms amounting to at least 0.5 per cent of GDP per year ,” Mr Fagan said.
“So fiscal consolidation is needed. We’re not out of the woods in that sense.”
The Cental Bank estimates that GDP grew by 5.1% in 2014, but said this figure overstates the real underlying strength of the economy for technical reasons.
While attributing the overstatement to the inclusion in Irish export data of contract manufacturing carried out abroad for Irish-registered firms, the bank declined to estimate the extent to which this had boosted growth in 2014.
Its growth forecast for 2015 was conducted on the basis that the export increase seen in the first of 2014 as a result of such activities was a once-off event.
Citing the resumption of growth in consumer spending last year, the bank said it is now projecting that economic output will expand 3.7% on a gross domestic product basis in 2015. This forecast marks a 0.3 percentage improvement on its last estimate, three months ago.
The bank has also forecast a modest growth pick-up in 2016, with the rate of GDP acceleration set to expand by 3.8%. Mr Fagan, who expects the main benefit to Ireland from the new ECB stimulus plan, would be an improvement in general economic conditions in the euro zone, said the forecast had taken account of the likely impact of the quantitative easing programme.
Domestic demand was likely to the main driver of growth in 2015. “An improving labour market, rising real disposable incomes and higher asset prices should all lend support to domestic demand as the economy returns to more normal operating condition,” the forecast said.
“The growth in net exports in 2014, in part reflecting the impact of contract manufacturing activities, is not anticipated to continue this year with export growth projected to moderate to be more in line with conditions in Ireland’s major trading partners.”
Almost half 50% of all Irish septic tanks fail inspection
48% of household septic tanks inspected by local authorities failed
The review of the first year of the National Inspection Plan for septic tanks has shown that almost half of household septic tanks fail inspection.
The Environmental Protection Agency report showed that 48% of household septic tanks inspected by local authorities failed.
Many of the failures could be avoided by householders taking simple steps to de-sludge and maintain their treatment system.
987 inspections were carried out by local authority inspectors and more than half of domestic waste water treatment systems passed inspection.
The EPA has said that it expected the failure rate to be significant, but that many of the failures could have been avoided by very simple measures.
Programme Manager of the EPA’s Office of Environmental Enforcement David Flynn told RTÉ’s News at One that half of the problems were very straight-forward, and required cleaning the tank rather than replacing it.
He said the EPA is trying to increase the awareness of servicing the tank on an ongoing basis.
“We were expecting that the failure rate would be significant and I think what this shows is that the failures, a lot of them could have been avoided by very simple things things that people could do, such as de-sludging the tank, which is effectively just emptying the system on a regular basis,” he said.
A Strong demand for Ireland’s first long term bond
Ireland sold its first ultra-long government bond on Tuesday, taking advantage of record low rates in Eurozone bond markets.
Investors put in orders of more than €11bn for the €4bn bond, a high level of demand that crimped the final price down from the initial whispers of close to 100 basis points above mid-swaps, a Eurozone pricing benchmark, to 90bps over mid swaps for a yield of 2.08%.
Dublin is following in the footsteps of Portugal and Italy in issuing 30-year debt at a time when yields on Eurozone bonds are hitting record lows following the European Central Bank’s decision to begin a €60bn a month government bond buying programme.
Portugal sold €2bn of its long-dated bond at a yield of 4.13%, while Italy’s €6.5bn equivalent bond was priced to yield 3.29%.
Investor appetite for longer-term bonds has increased in recent months as yields on shorter-term debt fall, in some cases trading in negative territory. According to JPMorgan, the total universe of government bonds trading with a negative yield was $3.6tn last week, or 16 per cent of the JPM Global Government Bond Index.
The Irish bond placing was completed as the Central Bank of Ireland upgraded its forecast for Irish economic growth for this year by 0.3% points, to 3.7%, largely as a result of a slow but sustained pick-up in domestic demand. Last year brought the first signs that domestic demand was recovering after being in the doldrums since a financial crisis that saw the collapse of property prices and various banks.
The bank’s forecast compares with an expected outcome for GDP growth in 2014 of 5.1%. However, central bank officials said the 2014 figure overstated the real level of economic activity during the year because of “contract manufacturing” — offshore activity by the country’s outsized pharmaceutical industry.
A further note of caution was added on Tuesday by Moody’s, which said Ireland’s continued high debt to GDP level and relatively weak banking sector remained its biggest weaknesses in an otherwise improving economic environment.
Both the central bank and the rating agency also urged Dublin to keep fiscal policy tight after a recent effort at loosening, sparked mainly by political pressure on the government for more spending with about a year to go to the next general election. Gabriel Fagan, the central bank’s chief economist, said: “Fiscal consolidation is needed — we’re not out of the woods in that sense.”
Barclays, Citi, Crédit Agricole CIB, Danske Bank, Davy and Royal Bank of Scotland arranged the sale of Irish debt, which will mature in February 2045.
Yields on Irish benchmark 10-year debt remained relatively steady on Tuesday at 1.15%.
The giant guinea pig’s nasty nibble
The extinct giant rodent Josephoartigasia monesi, which had a bite as powerful as that of a tiger, scientists have discovered.
A “guinea pig” the size of a buffalo that lived three million years ago had a bite as strong as a tiger’s, scientists have learned.
Experts believe it may have used its giant rodent teeth in the same way an elephant uses its tusks, to dig for food and defend itself.
Josephoartigasia monesi, which is closely related to modern guinea pigs, is thought to have weighed a metric tonne.
Scientists used computer simulation methods to estimate how powerful a bite it had.
They came up with a force of around 1,400 Newtons – about the same as that of a tiger’s clamping jaws.
But the incisors would have been able to withstand almost three times that amount of force, according to the research.
Lead scientist Dr Philip Cox, from the University of York, said: “We concluded that Josephoartigasia must have used its incisors for activities other than biting, such as digging in the ground for food, or defending itself from predators.
“This is very similar to how a modern day elephant uses its tusks.”
The study, published in the Journal of Anatomy, involved scanning a Josephoartigasia monesi specimen and creating a virtual reconstruction of its skull.
This was then subjected to an engineering technique that predicts stress and strain in a complex geometric object.